Recent OIG Advisory May Also Apply to Vendor Fees

By Elizabeth E. Hogue, Esq.

On May 20, 2011, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services, the primary enforcer of fraud and abuse prohibitions, posted Advisory Opinion 11-06.  This Opinion makes it clear that post-acute providers that pay hospitals to participate in e-discharge planning systems likely violate the federal anti-kickback statute.  Hospitals utilizing such systems that require post-acute providers to “pay to play” also likely violate the federal anti-kickback statute.

Specifically, the OIG considered use of e-discharge planning systems by hospitals that are often encountered by post-acute providers.  In many instances, post acute providers are required to pay fees in order to receive referrals electronically through systems implemented by hospitals.  Providers who do not pay required fees receive notice of possible referrals via fax.  Consequently, post-acute providers who elect not to pay to participate in electronic discharge planning systems are significantly disadvantaged and may be effectively eliminated from any chance of receiving referrals because they are unable to communicate in a timely manner with hospital discharge planners regarding referrals.

Based upon the above, the OIG concluded that such arrangements likely violate the federal anti-kickback statute.  The OIG said that companies that provide e-discharge systems to hospitals would be soliciting and accepting, and post-acute providers would be paying remuneration in return for the arranging for the furnishing of post-acute care services by e-discharge planning companies of post-acute services for which payments would be made by federal health care programs.  The OIG went on to say that such arrangements do not qualify for protection under applicable safe harbors, including the safe harbor for referral services.  In addition, post-acute providers continue to be plagued by hospitals that claim that post-acute providers cannot enter hospitals and/or gain access to patients to coordinate post-acute services because they are “vendors.”   Hospitals may permit access by post-acute providers only if they comply with complex, inapplicable restrictions.  Still other hospitals require post-acute providers to pay fees in order to gain access to patients for the purpose of coordinating post-acute services.

On the contrary, post-acute providers; such as home health agencies, home medical equipment (HME) companies, hospices, and private duty home care agencies; are not vendors and should not be treated like vendors. They are, instead, fellow providers. Vendors are manufacturers and distributors of supplies and equipment that are utilized by hospitals on their premises.

Does the OIG Advisory Opinion described above also apply to vendor fees?

First, since post-acute providers are not vendors, the payments of fees to hospitals directly or to hospitals’ contractors who implement vendor checks may constitute impermissible kickbacks. In addition, it appears that the OIG Advisory Opinion described above may indeed apply to vendor fees.  The OIG’s main point is that post-acute providers cannot be required to pay fees in order to receive referrals, i.e. “pay to play.”  If providers who pay vendor fees received referrals, but providers who do not pay fees do not receive referrals or receive fewer referrals, such practices seem to be prohibited by the OIG.

While post-acute providers certainly understand that hospitals may want to “credential” their vendors, it is inappropriate to treat post-acute providers and vendors and require them to pay fees to qualify or be “credentialed.”  This practice seems to violate the OIG Advisory Opinion described above.

© 2011 Elizabeth E. Hogue, Esq.  All rights reserved.  No portion of this material may be reproduced in any form without the advance written permission of the author.